eBook Calculator Print Item Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $68,000 and $54,000 to each member, respectively. In addition, the operating agreement specified an income-sharing ratio of 3:5. The two members withdrew amounts equal to their salary allowances. Revenues were $668,000 and expenses were $520,000, for a net income of $148,000. a. Determine the division of $148,000 net income for the year. Schedule of Division of Net Income Farley Clark Total Salary allowance Remaining income Net Income b. Provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members. For a compound transaction, if an amount box does not require an entry, leave it blank. (1) HII I (2) b. Provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members. For a compound transaction, if an amount box does not require an entry, leave it blank. (1) III IIII 111 1110 (2) c. If the net income were less than the sum of the salary allowances, how would income be divided between the two members of the LLC? If the net income of the LLC were less than the sum of the salary allowances, members would still be credited with their salary allowances. The difference between the net income and total salary allowances would be allocated to each partner as according to ratio the Marvel Media, LLC, has three members: WLKT Partners, Madison Sanders, and Observer Newspaper, LLC. On January 1, 202, the three members had equity of $130,000, $35,000, and $80,000, respectively. WLKT Partners contributed an additional $30,000 to Marvel, Media, LLC, on June 1, 2012. Madison Sanders received an annual salary allowance of $75,400 during 2072. The members' equity accounts are also credited with 18% interest on each member's January 1 capital balance. Any remaining income is to be shared in the ratio of 4:3:3 among the three members. The revenues, expenses, and net income for Marvel Media, LLC, for 2072 were $1,069,943, $819,943 and $250,000 respectively. Amounts equal to the salary and interest allowances were withdrawn by the members. a. Determine the division of income among the three members. If an amount box does not require an entry, leave it blank. Schedule of Division of Income WLKT Partners Madison Sanders Observer Newspaper, LLC Total Salary allowance Interest allowance Remaining income (4:33) Net Income b. Prepare the journal entries to close the (1) net income and (2) withdrawals to the individual member equity accounts. For a compound entry, it an amount box does not require an entry, leave it blank. c. Prepare a statement of members' equity for 2072. If an amount box does not require an entry, leave it blank. Marvel Media, LLC Statement of Members' Equity For the Year Ended December 31, 2012 WLKT Partners Madison Sanders Observer Newspaper, LLC Total Balances, January 1, 2012 Capital additions Net Income for the year Member withdrawals Balances, December 31, 2012 d What are the advantages of an income-sharing agreement for the members of this LLC? Without an income-sharing agreement, each member be credited with an equal proportion of the total earnings, or one-third each. Separate contributions be acknowledged in the income-sharing formula
